An empirical study to identify parameters which are important in the determination of dividends by publicly quoted companies.

Abstract

Dividends are very important considerations for any individual seriously considering investing in a company. An investor invests 1n a company 1n the hope of receiving some form of financial gain, which would be in the form of dividends. It ]_8 this factor which makes dividends very important and thus the ultimate objective of any dividend policy pursued by the f rrm should be the maximization of its shareholder's wealth.

This. study investigates the variables that determine dividends with the aim of identifying those which determine dividends among companies quoted on the Nairobi Stock Exchange.

A sample of thirty six companies is used to bring out the relationship between dividends and certain variables namely: profits, liquidity, investments, working capita] and cashflows.

A r-egressi on of dividends against the five variables indicate that liquidity and working capital are very important variables In the determination of dividends among publicly quoted companies.

Certain companIes revealed the presence of multicollinearity which w as corrected' by dropping collinear variables but the presence of liquidity and working capital was still strong. It is sad to note however that some companies do not take into account any of these five very important- factors in the determination of dividends.